Irrational Exuberance Again?

Darn It! I missed another rally, again! The Dow went up nearly 500 points today on the hope that Treasury Secretary Geithner's re-hash of ex-Treasury Secretary Hank Paulson's original Toxic Asset Recovery Plan will work. Essentially, private investors will be given financial aid to buy up those toxic assets from the banks. If investors buy in then the market will continue its upward trend, it seems, having gone up 1300+ points in the last 2 weeks. On the other hand, this sudden run-up reeks of irrational exuberance. Joy that the government will take on a seemingly bottomless trove of mind-numbing debt is well, mind-numbing.

Nevertheless, the market's recent performance does give credence to the notion that the market is hovering around bottom. Man, it would be nice to ride its return to glory. Alas, us "poor middle class folk" will largely miss out on this and the next run-up due to shortage of funds. Having the ability to invest now in this down market would definitely help to minimize the losses in our existing retirement accounts. It will take many years for those accounts just to return to their 2007 values, the last time many us felt "rich." So the only way to actually get ahead in the future is to have some "new" money in the market while it returns our existing investments and retirement accounts back to their "old" value. It is really annoying to have the old axiom play out again, "needing money to make money".

Unfortunately, this time around is much more bile-inducing than it was previously since the solution to fix the economic crisis is essentially an elaborate "trickle down" solution. By saving the financial institutions and their stewards, read rich Wall Streeters, the economy will be stabilized and the rest of us should just be thrilled that we get to keep our job or that a new one will be created for us or that we get to keep our homes. Some consolation prize. I'd prefer the Bernie Madoff's family consolation prize; he goes to jail but the rest of them get to live richly for the remainder of their lives off of those ill-gotten gains. It ain't fair, I tell ya. Life is not fair but it would be nice to be in the "protected class."

Today's rally signified another financial bounce of air, but it is the type of air that we still wish will put enough confidence in the markets to change the status quo. We need businesses to have confidence to reduce further layoffs and for investors to put their money back into the markets and for money to start flowing again. I sound like I have drunk the koolaid. Am I not just repeating the party line? It is annoying. I search daily for new ideas but there is only lots of criticism about current plans; there are no different solutions posited, only arguments about the details of what we already have before us. While we all want out of the pain and the doom and gloom and want it to be over ASAP, can the excess of the last few decades really be turned around within such a short time? Are we asking too much? By eschewing the principles of Capitalism by not allowing the system to fix itself, can Capitalism regain its footing after all of this stimulus?

Taking the easy way out may very well be to our detriment. I hate having to think like this but they always say, "no pain, no gain." So, by trying to head off all of that pain caused by greed and excess, are we not really fouling the system some more. It is paradoxical that we have to use the very same financial tactics that got us into this mess to get us out of this mess. I am very sorry about that since more of the same did not work out so well for Iraq, for instance which, incidentally just celebrated 6 years of combat and we didn't even have a moment of silence in remembrance. All we had was just silence. The Iraq war is far from over and a "surge" in troops in Afghanistan is all but certain but now war has become the least of our problems. Go figure.